1. What is Simple Interest?

Simple interest is a method of calculating the interest charge on a loan based on the original principal amount. It's commonly used for short-term loans in Canada.

2. How Does the Calculator Work?

The calculator uses the simple interest formula:

Where:

• \( P \) — Principal amount (CAD)
• \( r \) — Annual interest rate (in decimal form)
• \( t \) — Time period in years

Explanation: The interest is calculated as a percentage of the original loan amount for each time period.

3. Importance of Interest Calculation

Details: Understanding interest calculations helps borrowers know the true cost of loans and helps lenders determine appropriate rates.

4. Using the Calculator

Tips: Enter principal in CAD, annual interest rate as a decimal (e.g., 5% = 0.05), and time in years. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: Is this calculator specific to Canadian loans?
A: While the formula is universal, this calculator is designed with Canadian currency (CAD) in mind.

Q2: What's the difference between simple and compound interest?
A: Simple interest is calculated only on the principal, while compound interest is calculated on principal plus accumulated interest.

Q3: How do I convert percentage to decimal?
A: Divide the percentage by 100 (e.g., 7.5% becomes 0.075).

Q4: Can I use this for monthly calculations?
A: Yes, but convert months to years (e.g., 6 months = 0.5 years).

Q5: Are Canadian loan interest rates typically simple or compound?
A: Most Canadian loans use compound interest, but some short-term loans may use simple interest.